Crestwood Midstream Partners LP (NYSE: CMLP) has purchased the remaining 65% interest in Crestwood Marcellus Midstream LLC from Crestwood Holdings Partners LLC for $258 million.
Crestwood now owns 100% of Crestwood Marcellus Midstream's natural gas gathering, compression and dehydration business located largely in the southwestern core of the Marcellus shale play. The assets consist of 40 miles of low pressure gathering pipeline and 43,000 horsepower of compression assets in Harrison and Doddridge Counties, W. Va., supported by long term, 100% fixed-fee contracts with Antero covering 136,000 net acres with seven year minimum volume guarantees and the rights to acquire additional Antero midstream assets on adjacent acreage.
The transaction is expected to be 7-8% accretive to Crestwood's 2013 distributable cash flow on a fully diluted basis and was funded with $129 million of cash drawn on Crestwood's existing revolving credit facility and approximately 6.2 million new Crestwood class D units issued to Crestwood Holdings. As a part of the consideration received for the transaction, Crestwood Holdings is maintaining its 2% general partner interest in Crestwood. Crestwood does not expect any additional capital markets activity related to this transaction.
Crestwood Holdings plans to use the cash portion of the purchase price to reduce debt, which will provide Crestwood Holdings incremental flexibility to continue its support of future Crestwood growth through incremental capital investment.
The $258 million purchase price reflects an enterprise value of $525 million for 100% of Crestwood Marcellus Midstream, including net Crestwood Marcellus Midstream debt of approximately $130 million, and implies a transaction value of approximately 8.9 times estimated Crestwood Marcellus Midstream 2013 earnings before interest, taxes, depreciation and amortization, which is consistent with comparable transactions in the midstream sector.
The transaction was unanimously approved by the Crestwood general partner conflicts committee, comprised entirely of independent directors, which retained Robert W. Baird & Co. Inc. as its independent financial advisor to assist in evaluating the transaction and to render a fairness opinion. Additionally, the conflicts committee engaged the law firm of Akin Gump Strauss Hauer & Feld LLP to serve as its legal counsel.
Houston-based Crestwood is a midstream master limited partnership which owns and operates predominately fee-based gathering, processing, treating and compression assets servicing natural gas producers.